Stock prices in Japan were weak in March as the yen strengthened. In the middle of the month, the yen rose sharply, climbing from more than ¥100 to the U.S. dollar to about ¥95 in a single night. This triggered a drop in the Nikkei Average to ¥11,860 during interday trading on March 17.

Due to these difficult market conditions, only half of the 12 March IPOs started trading at prices that were above their offering prices. There was no change in this ratio at the end of the month. Stocks that started trading above their offering prices remained at that level; the other six offerings were still below their offering prices at the end of March. Of the six companies that had stock prices above the offering prices, five are listed on TSE Mothers and four belong to the IT sector.

There have been 21 IPOs during the first three months of 2008, the smallest number since 2000. Since only one IPO has been approved for April, this will also be true of the first four months of 2008. Between 2000 and 2007, the smallest number of April IPOs was 12 in 2003 and the highest was 20 in 2006. Why? The cause is probably the absence of IPOs that are carried over to the next fiscal year. For example, a company that uses a fiscal year ending in March 31 for its IPO application may end up conducting the IPO in April. Over the past eight years, there has been an average of eight of these carryover IPOs in April each year.

The limit for using prior-year operating results for an IPO is the date of the annual shareholders meeting, which is when the financial statements are approved. As a result, there are normally a few carryover IPOs for March fiscal year-end companies in May and June, too. Over the past eight years, there has been an average of nine carryover IPOs in May and June for companies closing their books in March. If there are no carryover IPOs at all this year for March fiscal year companies, we will probably see a big drop in the total number of IPOs. At the beginning of this year, I predicted that the number of IPOs in 2008 would probably drop below 100. At this pace, however, this figure could be as low as about 80.

Stock prices have settled down somewhat at the beginning of April. Let’s take a look ahead for the secondary market stock prices of companies that conducted a recent IPO.